Top Crypto News – 15/03/2018

Japan plans to urge its G20 counterparts next week to strengthen efforts to prevent cryptocurrencies from being used for money laundering, according to a government official, Reuters reported.

However, the likelihood of the G20 finance leaders to agree on specific global rules and discuss them in a joint communique are low, considering the differences in each country’s approach, the official said. Another official involved in the talks next week offered the same view.

One official said the discussion will address consumer protection and anti-money laundering measures, as opposed to cryptocurrency trading’s impact on the banking system.

G20 Officials Wary Of Strict Rules

The G20 members are reluctant to support strict regulations, the official said.

G20 Central bankers and finance ministers will meet March 19 and 20 in Buenos Aires. Cryptocurrencies is on the agenda.

The Financial Action Task Force (FATF), a group of 37 nations set up by the G7 industrial powers to counter illicit finance, will report its finding on keeping cryptocurrencies from being used in money laundering.

Policymakers in Japan are wary that while G20 nations agree action is needed, member nations have different levels of strictness in their regulations, creating loopholes for money laundering, according to one official.

Japan was the first nation to establish a nationwide system to monitor cryptocurrency trading. The country checked on several exchanges this year following the heist of $530 million from the Coincheck Inc. exchange.

European Leaders Seek Action

Germany and France have committed to making joint proposals to regulate bitcoin. A European Union official said a short-term strategy could apply rules on anti-money laundering and terrorist financing, and warn consumers about the risk of trading cryptocurrencies and prevent banks from holding them.

The challenge nations face, according to Japanese officials, is to apply regulations to prevent illicit activity and protect consumers without undermining cryptocurrency and fintech innovation.

Written by CCN.com

Velvet has always been a sign of nobility, but in the crypto space, it’s now the name adorning a new and promising way for upgrading blockchain software.

At least that’s the hype behind “velvet forks,” a mechanism for upgrading cryptocurrency code that has some high-profile crypto enthusiasts intrigued.

“We think the most interesting part is the idea that you can introduce some new concepts to permissionless blockchains without necessarily having a majority of consensus participants agree to do so,” said Imperial College London research assistant Alexei Zamyatin.

And that complex statement cuts to the core of why Zamyatin and others believe velvet forks might be beneficial.

In short, in the cryptocurrency space, there have long been two types of forks that people generally discuss – soft forks and hard forks.

While soft forks are seen as less disruptive in that they’re backwards-compatible, they can still be controversial when used to initiate changes not all cryptocurrency users agree with. Further, hard forks are generally seen in a dubious light since they can split a blockchain in two if not all users decide to update to the new rules.

With velvet forks, however, some researchers think the cryptocurrency world can get around some of the disruptive politics that generally bog down major code changes.

First coined by computer scientists working on building proofs that can potentially be used to improve sidechains, a layer-two cryptocurrency technology for pushing transactions off-chain, a velvet fork allows developers to add new rules to a blockchain without full support from the entire ecosystem.

According to Zamyatin, “It’s not rocket science. It’s a pretty simple concept.”

As such, Zamyatin and several other researchers co-authored a new paper that dives deeper into where the mechanism can be applied, which he presented during the Financial Crypto 2018 conference in Curacao at the beginning of the month.

The new paper states:

“The velvet fork […] does not require support of a majority of participants and can potentially avoid rule disagreement forks from happening altogether.”

In the wild

Simply, a fork is a way to upgrade a cryptocurrency system to support important new rules, and throughout the history of multiple cryptocurrency protocols, forks have been used often.

From the hard fork that split ethereum into a competing cryptocurrency ethereum classic to less controversial forks like the one used to move bitcoin to a new signature scheme to the ever-growing number of forks designed to not only create new cryptocurrencies with new features, but also make entrepreneurs (or scammers) substantial amounts of money, forks have become a part of life in the cryptocurrency ecosystem.

But these mechanisms come with a fair amount of controversy much of the time, which is partly why Zamyatin and other academics are so interested in the velvet fork approach.

In the December 2017 paper where velvet forks were first mentioned, the mechanism is described as one that allows for “gradual deployment” without harming the miners that haven’t upgraded to the new rules. In this way, it acts similar to a soft fork in that clients that upgrade to new rules are still compatible with those that don’t.

Further, the paper states that velvet forks require “no rule modifications to the consensus layer,” what some see as advantageous since these are the rules everyone in the system needs to agree with, or everything will break.

While it hasn’t become widely-used as a way of upgrading, velvet forks exist in the wild today in various forms (although researchers argue there wasn’t an official name for the mechanism before this recent wave of research).

Since there is no one entity (replacing that with code instead) that controls the payments dispersed to the miners of the pool for their work, the pool created a second blockchain with an easier difficulty that only miners part of the pool can contribute to. This blockchain is used to gauge how much computing power each miner is contributing, so the protocol can pay them out proportionally.

Even though the blocks generated by P2pool use these extra rules, miners that don’t play by these same rules still accept P2pool’s blocks.

As such, P2pool is an example of a “velvet fork” because the blocks (from both their proprietary blockchain and the bitcoin blockchain) live side-by-side in harmony, without causing a split.

Bias and bribery

Still, velvet forks are a potential vulnerability.

Namely, the paper describes possible ways that velvet forks could be abused by bad actors for their own gain.

For instance, say a velvet is deployed. Zamyatin’s paper describes a scenario where some miners, called “velvet miners,” upgrade to new rules while others ignore the new rules. If the blocks that the velvet miners create are somehow more lucrative than regular blocks, the paper argues other miners could be “biased towards accepting upgraded over legacy blocks.”

“This, in turn, can have an unclear impact on the security assumptions of such systems, as current attack models mostly do not assume a variable utility of blocks,” the paper continues.

And Zamyatin himself described another attack vector, which involves “selfish mining.”

Selfish mining is a process whereby miners hide the fact that they’ve found a block, keeping other miners searching for that block while they move on to searching for the next block. This gives them a head start of sorts in also winning the next block. And according to Zamyatin, velvet forks could enable new opportunities here.

He told CoinDesk:

“I can bribe people to work on my chain. There’s no guarantee that I’ll win, but it could potentially offer an incentive to deviate from the protocol rules.”

Still, more research is needed, as Zamyatin admits he isn’t sure how serious these problems are in practice.

Opening the door

But both these vulnerabilities and the thought of the changes velvet forks might enable are reasons Zamyatin wants researchers to spend more time looking into velvet forks.

“This doesn’t work for something like Segregated Witness (SegWit) of course,” he said, referring to a bitcoin code change that fueled a two-year debate in the community over the technical direction of the protocol.

That said, it’s still potentially useful for other types of changes.

Zamyatin noted that he’s looking into how it might be possible to use a velvet fork for bringing GHOST, the protocol that ethereum was originally modeled after, to bitcoin. Because it completely restructures the system to try to speed things up, it likely wouldn’t get enough support for a soft or hard fork, and as such a velvet fork where some get to opt in while staying in consensus with those that don’t could be the only way.

And velvet forks might also help breath new life into older proposed innovations.

Cornell associate professor Emin Gün Sirer, for instance, said he “very much” likes the idea of using a velvet fork for adding the long-stalled Bitcoin-NG (standing for “next-generation”) protocol, an idea he pioneered which looks to improve throughput by rearranging the bitcoin blockchain, to the cryptocurrency.

“While [the paper is] short on the details, the overall idea of adding new functionality without incurring the risks and complication of either a soft or a hard fork is quite compelling,” Sirer told CoinDesk.

And perhaps most far-fetched but interesting of all, Zamyatin believes an even bigger vision could be realized with velvet forks.

He told CoinDesk:

“You could even have multiple versions running in parallel, perhaps even compatible to each other, and all this without necessitating often controversial soft or hard forks.”

Velvet image via Shutterstock

Bitcoin Drops to $8,030 as Cryptocurrency Market Continues to Slump

The price of bitcoin dropped by over 9 percent in the last 24 hours, as it declined from around $9,100 to $8,030. The valuation of the cryptocurrency market, which hovered in the $400 billion region last week, decreased to $336 billion.

All Cryptocurrencies Decline

Today’s correction isn’t exclusive to bitcoin. All major cryptocurrencies including Ethereum, Bitcoin Cash, Ripple, Cardano, and Litecoin have declined in value, at a similar rate as bitcoin. Ethereum recorded a daily loss of 10 percent, while Ripple and Bitcoin Cash both decreased by just over 9 percent.

Some analysts have attributed the decline in price of cryptocurrencies to the ICO hearing participated by US representatives and government officials, in which several representatives including Carolyn Maloney, Representative for New York’s 12th congressional district, claimed that the cryptocurrency market is a bubble.

The negative comments of US representatives followed a report released by $81 billion investment firm Allianz, which claimed that bitcoin has no intrinsic value and therefore, could fall in price. “In our view, its intrinsic value must be zero. A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream,” said the firm’s global economics and strategy head Stefan Hofrichter.

However, the lack of intrinsic argument often brought up by experts in the traditional finance industry has been refuted by both cryptocurrency and technology experts on many occasions, as CCN reported.

The combination of the US ICO hearing, Mt. Gox sell off, overall market performance over the past month, and negative media coverage are contributing to the decline in the value of the cryptocurrency market.

Currently, the media is not portraying the innovative developments being pursued within the cryptocurrency industry, especially the increasing adoption of cryptocurrencies in regions like Japan and South Korea. Last week, CCN extensively reported about South Korea’s largest internet conglomerate Kakao, which operates KakaoTalk, KakaoPay, KakaoTaxi, KakaoStory, and Dunamoo (UpBit), focusing on cryptocurrency development.

In fact, after reports around Kakao integrating cryptocurrencies and introducing the asset class to 12,000 merchants, 200 million KakaoTalk users, and millions of KakaoPay and KakaoTaxi users were released, Kakao invited Cardano creator and Ethereum co-founder Charles Hoskinson to their headquarters in Seoul.

Despite the rising adoption of cryptocurrencies and innovative developments being led by the bitcoin, Ethereum, Cardano, and Litecoin open-source developer communities along with other blockchain projects, the lack of momentum in the price of major cryptocurrencies is fueling the price fall of bitcoin.

Recovery

Today, on March 14, the price of bitcoin fell dangerously close to the $7,000 region, and given that it dipped below $8,030, it is possible that bitcoin could fall to the $7,000 mark in the short-term, which would be a steep decline from its weekly high at $11,400.

While most cryptocurrency analysts unanimously agree that bitcoin will likely recover in the mid-term, at least in the summer of 2018, it is unlikely that the price of most cryptocurrencies will spike up in the short-term.

Written by CCN.com

Block.one Responds to John Oliver after HBO Host Ribs EOS in Crypto Segment

OliverBlock.one published an open letter in response to Last Week Tonight host John Oliver after the comedian ribbed the company’s flagship project — EOS — during Sunday’s cryptocurrency-themed episode.

John Oliver Ribs EOS, Brock Pierce in Crypto-Themed Episode

As CCN reported, Oliver devoted an entire episode to cryptocurrency, a topic which, in his words, “combines everything you don’t understand about money” with “everything you don’t understand about computers.”

Most viewers lauded Oliver for his overall balanced take on the ecosystem, but fans of blockchain project EOS took issue with the host’s characterization of this cryptocurrency — and its mammoth initial coin offering (ICO).

Specifically, Oliver poked fun at Block.one partner Brock Pierce, an early cryptocurrency adopter known for his eccentricities.

After playing several clips of Pierce, including one in which he discussed his “unicorn wedding,” Oliver said:

“I simply refuse to believe that a man who has the time to organize a unicorn wedding at Burning Man should be trusted around one and a half billion dollars. If someone turned up to mow your lawn and gave you that exact speech you would tell them, ‘No way! I don’t trust you with my lawn.’ He’s just gonna organize a warlock quinceañera on it.”

Oliver then extended his criticism to make EOS the poster-child of the ICO craze, which has seen a variety of dubious projects raise eye-popping amounts of capital.

“Who knows? Maybe EOS is going to be the next Google. I don’t think it is, and I certainly don’t think it can be worth over a billion dollars at this point, but I could be wrong. I’m absolutely not, but I could be,” Oliver concluded.

Block.One Responds to HBO Host

On Tuesday, Block.one responded to Oliver’s segment in an open letter published on the EOS blog.

In the statement, which was addressed to “Block Chainiver” (Oliver floated changing his name to increase his ratings, much as several companies have done in an apparent bid to pump up their share prices), Block.one said that the company enjoyed the segment and agreed with his overall points about doing proper research before investing cryptocurrencies.

However, the company also pushed back a bit against his criticisms, arguing that the company’s chief technical officer — Dan Larimer — is immensely qualified as a developer, given that he has built both BitShares and Steem. It also noted that Larimer and the other EOS developers are consistently making progress on developing the EOS blockchain and that these developments can be seen on the project’s Github repository.

Block.one also revealed that — prior to the Last Week Tonight segment — the company and Brock Pierce had mutually agreed to part ways as he “transitions to independent community building and investment activities.”

The company concluded its statement by acknowledging that there is room for improvement in the way in which it conducts corporate communications.

“As a growing company building value through an open source community as opposed to traditional avenues of proprietary software ownership, we are conscious of the importance of robust corporate communications,” the company said. “We take professional standards seriously and are always focused on raising the bar as our company transitions from startup to aggressive growth.”

Written by CCN.com

Privacy Coin Verge Has Its Twitter Hacked and Developer Doxed

Verge Developer Sheds Some Privacy

Twitter account hijackings, while relatively uncommon, can happen to even the largest of accounts. They’ve happened to celebs, and in the crypto space they’ve happened to smaller players like Etherdelta and now Verge. When the XVG team regained access to their account, some hours after the hack, they instantly blamed AT&T, implying that the network had allowed itself to be socially engineered and the account ported over via SIM swap. This would be less embarrassing than if it were to emerge, for instance, that the project lead had failed to use 2FA.

After the hack had occurred, the compromised Verge account sent out the following message:

It’s impossible to verify the claim that 1 billion XVG (or about 6% of the total supply) were stolen, though it seems unlikely. For one reason, if the account’s new owner was sitting on that much crypto, they’d have had no need to send out their next tweet, begging followers to send a little XVG to “receive more back”. The attacker seems to have just been having some fun in a community famed for its intolerance of negativity towards Verge.

Not FUD, Just News

XVG lead developer Justin was the target of the hack, which led to his personal account, as well as the official Verge account, being compromised, and his photo ID published. The Verge family were quick to suggest that the attacker acted because they had felt “threatened” by the altcoin’s ascendancy. They also blamed Twitter for the hack, in between asserting, perhaps in jest, that verge was “the real bitcoin”.

While Verge’s Twitter account hasn’t had much luck with security, it’s fared better at developing a passionate and single-minded community. Once back in charge of its own account, Verge went on to retweet messages of support, including one which referred to “continuous attacks and FUD from those wanting to do harm to the coin”. In this case, the only harm seems to have been a loss of face for the lead developer, and perhaps a few XVG to anyone who was dumb enough to send money to the wallet address provided by the hacker. At least one community member shared the offending tweet in a Verge Telegram group, under the impression that the giveaway was real.

This particular incident hasn’t ended badly, assuming no coins were stolen and it was only a Twitter account that was temporarily taken. The case serves as a reminder, though, to everyone in crypto to use 2FA and be alert to signs of SIM swapping and other forms of social engineering.